Options margin estimator
The calculations provided by the margin estimator are estimations only.
The following margin estimator may be used to calculate the theoretical fair value for options and estimate margins required by ASX Clear for short option positions:
ASX Clear uses CME-SPAN margining methodology to calculate margins.
To calculate theoretical option prices select the stock and option using the tool - don't enter a quantity - press calculate and theoretical price ($) will update. Underlying price, dividend amounts, and volatility can all be changed to update the theoretical price.
To calculate margins either select stocks and options manually using the tool or load a CSV file populated with ASX option codes and number of contracts held. For short options please add a minus sign in front of the number. Please review the sample CSV file for the format required.
The calculations provided by the margin estimator are estimations only. The margin indicated by the margin estimator can be expected to differ from margin determined by ASX Clear on option positions, including having regard to differences in end of day settlement pricing used to determine margin requirements. In addition your broker may require higher margins than the minimum required by ASX Clear. It is recommended that you speak with your broker regarding their margin policy.
If you have any questions regarding this tool please contact the ASX here.
ASX has adopted the widely used Standard Portfolio Analysis of Risk (SPAN) margining system developed and implemented by the Chicago Mercantile Exchange (CME) in 1988.
By using a set of pre-determined parameters set by the Clearing House, SPAN assesses what the maximum potential loss will be for a given combined commodity - which is a portfolio of derivatives grouped by product and matches the level of initial margin to cover this risk. In calculating the amount of margin required, SPAN recognises the unique characteristics of each position while also taking into account other factors such as intra-commodity (inter-month) and inter-commodity spread relationships.
“’SPAN’ is a registered trademark of Chicago Mercantile Exchange Inc., used herein under license. Chicago Mercantile Exchange Inc. assumes no liability in connection with the use of SPAN by any person or entity.”
In its simplest form, SPAN can be considered as a system that uses a risk-based portfolio approach to calculate initial margin requirements.
Total Initial Margin = max(Short Option Minimum Charge, Scanning Risk + Intracommodity Spread Charge + Delivery Risk – Intercommodity Concession).
By using a set of pre-determined parameters set by ASX Clear, SPAN assesses what the maximum potential loss will be for a portfolio of derivative and physical instruments over typically a one-day period. The gains and losses that the portfolio would incur under different market conditions are computed.
SPAN uses risk arrays, which is a set of numeric values that specify if a particular contract will gain or lose value under different conditions (risk scenarios). The value for every risk scenario symbolises the gain or loss for that contract for a certain combination of volatility change, price (or underlying price) change, and decrease in time to expiration.
As mentioned, ASX has determined the following SPAN parameters, which mirrors ASX’s, preferred degree of risk coverage:
SPAN assesses what the maximum potential loss will be for a given combined commodity which is a portfolio of instruments over the same underlying instrument. For each combined commodity, SPAN evaluates:
